The First Time the Conservative Party Eliminated the Canadian Wheat Board

Last November, ahead of the House of Commons vote on the elimination of the Canadian Wheat Board purchasing monopsony, the federal Minister of Agriculture, Gerry Ritz, and his provincial cohorts from Alberta and Saskatchewan held a press conference to celebrate the achievement of the federal Conservative Party’s long-held policy objective. Alberta Agriculture Minister, Evan Berger proudly declared that “I believe we are giving back a property right, a freedom of choice, to farmers who make large investments, who have the wherewithal to sell their grain to whomever, whenever, at what price they see fit.” When asked why Stan Struthers, Manitoba’s Agriculture Minister, was absent, Minister Ritz derisively explained that, “Mr. Struthers and his government continue to be mired in the past.” But just what that past is remains unclear in the political and media debate over the fate of the Canadian Wheat Board. History, of course, plays a very significant role in this debate because this is not the first time the Conservative Party has tried to eliminate the Canadian Wheat Board.

In 1920, Prime Minister Arthur Meighen pulled a “mean trick” on Western Canadian farmers by eliminating the Canadian Wheat Board and reinstating the Winnipeg Grain Exchange as the predominant institution of the Canadian grain trade. After four consecutive wheat harvests sold under a state-controlled market, Meighen’s Conservative government sought to restore an open market in wheat which had been suspended since 1917.

In 1917, the government of Robert Borden — Meighen’s predecessor — overrode the open market in wheat by imposing a fixed price under the authority of the newly created Board of Grain Supervisors in an effort to halt the rapidly accelerating growth in wheat prices precipitated by wartime inflation during the Great War. From September 1, 1917 to July 21, 1919, the Board suspended all trading in wheat futures on the Winnipeg Grain Exchange. Wheat acreage grew during the war years in Manitoba, Saskatchewan, and Alberta from 9.3 million acres in 1914 to 16.1 million acres in 1918 as, according to John Herd Thompson, “[t]he demand of the Allies was primarily for wheat, and the Western farmer rushed to meet this demand.” The Board of Grain Supervisors issued price controls on wheat in order to stabilize the cost of wheat for wartime purposes. [1]

Following the emergency of the Great War, the federal government attempted to return the wheat trade to an open market and permitted the trading of futures on the Winnipeg Grain Exchange on July 21, 1919. Following ten days of frantic trading, speculators had driven the price of wheat up so quickly that Ottawa was compelled to again step in to reduce the inflationary pressure. On July 31, the federal government created the Canadian Wheat Board as the exclusive marketer of prairie wheat, replacing the Board of Grain Supervisors. Unlike the wartime Board, the CWB did not buy and sell wheat at a fixed price. Instead, it bought wheat at a fixed advance and later distributed a proportionate share of any additional funds from the total sales of the crop to Western Canadian farmers. [2]

The first Canadian Wheat Board remained in operation for just one year as an emergency measure to control inflation and limit the escalation of food prices. Farmers, however, saw great value in the high prices and stability afforded by the government marketing system. The Saskatchewan Co-operative Elevator Company passed a resolution at its annual meeting in December 1919 stating “that we favor the national marketing of our grain through a body similar to the Canadian Wheat Board, on which the farmers shall have adequate representation.” While this sentiment was not unanimous among Western Canadian farmers, it was clear that most farmers did not want to return to the open market on the Winnipeg Grain Exchange. [3]

When Meighen thrust farmers back onto the pre-war open market system for the 1921 crop year, farmers were shocked by the sudden drop in prices. According to Dominion Bureau of Statistics records, the average annual price per bushel dropped from $2.51 in 1920 to $1.65 in 1921. While the staggering downward price pressure cannot be solely attributed to the open market system, grain growers were convinced that the abandonment of the CWB had been a mistake. Following disastrous crop years in 1921 and 1922, Western Canadian farmers chose to abandon the open market and by-pass the speculators on the Winnipeg Grain Exchange by establishing co-operative wheat pools. In 1923-24, all three prairie provinces established wheat pools and conducted their pooling activities through a collective Central Selling Agency, which effectively supplanted the speculators on the Winnipeg Grain Exchange. During its years of operation between 1923 and 1931, this collective wheat pool effort then subverted the open market. [4]

From 1931 to 1935, the Canadian wheat trade suffered from the dual environmental and economic disasters of the Great Depression and was highly modified by federal government liquidation and stabilization activities before the re-establishment of the Canadian Wheat Board in 1935 under a voluntary government marketing system. Finally, after more than twenty years of farmer protest and agitation, the monopsony authority of the CWB was restored in 1943 and persisted until 2012, nearly seventy years.

The early history of state-regulated wheat marketing through the Canadian Wheat Board provides crucial perspective on the decision of the federal government in late 2011 to rescind the CWB purchasing monopsony. This history provides several important revelations:

Western Canadian farmers have not independently sold wheat on a fully open market as independent sellers since 1922. That market operated for just two years before it was abandoned by many farmers in favour of cooperative wheat pools. This means that there is likely no Canadian with living memory of a truly open wheat market in Western Canada. Furthermore, a sustained open wheat market has not operated in Western Canada for longer than a two year period since before the Great War, nearly a century ago. Therefore, forcing Western Canadian wheat farmers into an open market constitutes a radical economic transformation to a market condition that last existed when the horse was the predominant form of transportation in Canada. Who then is mired in the past?

Many prairie farmers preferred government purchasing and marketing of wheat and opposed the decision of the Meighen government to eliminate the Canadian Wheat Board. The CWB system offered stable wheat prices and often higher wheat prices than that which could be obtained through the futures market on the Winnipeg Grain Exchange.

The decision of the federal government to rescind the CWB purchasing monopsony does not, in fact, return Western Canadian wheat farmers to a fully open market system because the CWB will continue to operate on a voluntary basis as it did from 1935 to 1943. The current Conservative government has framed its policy shift as an attempt to restore the rights of farmers to act as individual commodity producers, ignoring the history of cooperative wheat pools in the prairies as an alternative to a truly open market. Farmers may choose not to participate independently on the open market and instead choose the path of their predecessors and stay with the government-supported cooperative wheat pool of the CWB. After all, in an open market with many more sellers than buyers, commodity prices will be driven down as sellers compete with one another and profit-driven buyers benefit from a flood of supply.